Noodles (Noodles) Predictability Rank

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What is Noodles Predictability Rank?

Warren Buffett said many times that the companies he likes are:

1. Simple businesses that he understands
2. that have predictable and proven earnings and
3. with economic moat
4. those can be bought at a reasonable price.

It is hard to quantify "simple businesses that he (Buffett) understands", so we will focus on the other three characteristics instead. In GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank, we will show that the businesses that have predictable and proven earnings are usually also simple businesses that an average person could understand.

GuruFocus conducted a back test study of Warren Buffett's strategy of "buying good companies at fair prices" for the years from 1998-2008.

Noodles Predictability Rank Calculation

In our database there are 2403 stocks that have been traded from Jan. 2, 1998 to Aug. 31, 2008. We have the complete 10-year financial data and trading prices of these companies for this period. We rank the predictability of these companies based on the consistency of their revenue per share and EBITDA (earning before interest, tax, depreciation and amortization) per share over the past ten fiscal years, and study the correlation between the stock performances and the predictability of the business.

Our study may be subject to these biases and assumptions:

Dividend yields are not counted for investment returns
Effects of price changes due to spin-offs may not be fully adjusted
Study is subjected to survivorship bias due to de-listing, bankruptcy, LBO, M&A, etc.

The correlation between business predictability and investment returns of a company is showed below.

Correlation Between Business Predictability and Investment Returns

	Predictables	Non-Predictable	All stocks
Total Number of stocks	570	1833	2403
Total Lost Money	61	830	891
Total Lost More Than 50%	18	412	430
Total Lost More Than 90%	4	86	90
Average Gain	260.6%	100.0%	138.1%
Median Gain	150.0%	13.0%	39.0%
Maximum Gain	2852.0%	11483.0%	11483.0%
Maximum Loss	-100.0%	-100.0%	-100.0%
Annualized Average Gain	12.7%	6.7%	8.4%
Annualized Median Gain	8.9%	1.1%	3.1%

For the 570 predictable companies, we have seen strong correlation between the predictability of businesses and the stock performances over the past 10 years, regardless of the valuation of business at 1998. Accordingly, we have ranked the business predictability from 5-star to 1-star, as shown in this table.

Predictability Rank	5-Star	4.5-Star	4-Star	3.5-Star	3-Star	2.5-Star	2-Star	1-Star (non-predictable)	Average among all
% Out of All 2403 Stocks	3.3%	2.9%	3.7%	3.3%	3.3%	3.7%	3.3%	76.3%	100%
% that are in Loss (10y)	3%	10%	8%	9%	11%	18%	16%	45%	37%
Average Gain (10y)	364.6%	330.9%	278.0%	235.1%	243.5%	227.8%	154.8%	100.0%	138.1%
Median Gain (10y)	238.5%	193.5%	171.0%	159.0%	132.5%	113.5%	87.0%	13.0%	39.0%
Maximum Gainer	2228.0%	2547.0%	2452.0%	2852.0%	2432.0%	1892.0%	1807.0%	11483.0%	11483.0%
Maximum Loser	-82.0%	-53.0%	-67.0%	-100.0%	-83.0%	-100.0%	-78.0%	-100.0%	-100.0%
Annualized Average Gain	15.4%	14.6%	13.2%	12.0%	12.2%	11.7%	9.1%	6.7%	8.4%
Annualized Median Gain	12.1%	10.6%	9.8%	9.3%	8.2%	7.3%	6.0%	1.1%	3.1%

For detailed information about each predictability rank, please go to GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank

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Noodles (Noodles) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Consumer Cyclical » Restaurants » Noodles & Co (NAS:NDLS) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

NO3:Germany

Address

520 Zang Street, Suite D, Broomfield, CO, USA, 80021

Website

https://www.noodles.com

Noodles & Co is a restaurant concept offering lunch and dinner within the fast-casual segment of the restaurant industry. The company's menu includes a variety of cooked-to-order dishes, including noodles and pasta, soups, salads and appetizers. The company also provides dining, pick-up and delivery services.

Executives

Michael Hynes	officer: Chief Financial Officer	520 ZANG ST., UNIT D, BROOMFIELD CO 80021
Kline Corey	officer: EVP - Technology	520 ZANG ST., UNIT D, BROOMFIELD CO 80021
Thomas B West	officer: EVP - Operations	520 ZANG STREET, SUITE D, BROOMFIELD CO 80021
Mill Road Capital Iii, L.p.	10 percent owner	C/O MILL ROAD CAPITAL MANAGEMENT LLC, 328 PEMBERWICK ROAD, GREENWICH CT 06831
Melissa Heidman	officer: EVP & General Counsel	520 ZANG STREET, UNIT D, BROOMFIELD CO 80021
Kathryn Rae Lockhart	officer: Vice President & Controller	520 ZANG STREET, SUITE D, BROOMFIELD CO 80021
Mill Road Capital Iii Gp Llc	10 percent owner	C/O MILL ROAD CAPITAL MANAGEMENT LLC, 328 PEMBERWICK ROAD, GREENWICH CT 06831
Jeffrey W Jones	director	P O BOX 7, VAIL CO 81658
Shawn A Taylor	director	4931 MENO PARK DRIVE, SUGARLAND TX 77479
Mill Road Capital Ii, L.p.	10 percent owner	382 GREENWICH AVE., SUITE ONE, GREENWICH CT 06830
Sue Petersen	officer: EVP-Inclusion, Divers, People	520 ZANG ST., UNIT D, BROOMFIELD CO 80021
David James Boennighausen	officer: Chief Financial Officer	520 ZANG STREET, SUITE D, BROOMFIELD CO 80021
Catterton-noodles Holdings, Llc	10 percent owner	599 W PUTNAM AVE, STE 200, GREENWICH CT 06831
Carl E Lukach	officer: Chief Financial Officer	520 ZANG ST., UNIT D, BROOMFIELD CO 80021
Stacey Pool	officer: Chief Marketing Officer	520 ZANG ST., UNIT D, BROOMFIELD CO 80021